Portugal Downgraded, EU Fires back at Ratings Agencies
Ratings agencies came out of the recession with more mud on their faces than a bullfrog in the spring. They were the architects of many of the derivatives which turned out to have absolutely no value. You would ask the rating agency how to get a good credit rating, and for a fee, they would tell you. I am amazed they came out of it with as much credibility as they did, and really, they probably deserved to be fined and sued out of existence.
That said, they are still around, and kicking. Mostly because there is not a clear alternative at this point, though smaller independent competitors are springing up.
This time, Moodys has pissed off the EU and the Germans in particular for its downgrade of Portugal to "junk" status.
German Finance Minister Wolfgang Schaeuble told a news conference that he wanted to "break the oligopoly of the ratings agencies" and limit their influence. He mentioned that "panzers" and "a quick but strong offensive using motorized vehicles backed by infantry and air cover" might also be involved.
All over the EU, the ratings agencies were not getting a lot of love:
"The timing of Moody's decision is not only questionable, but also based on absolutely hypothetical scenarios which are not in line at all with implementation," said European Commission spokesman Amadeu Altafaj.
"This is an unfortunate episode and it raises once more the issue of the appropriateness of behaviour of credit rating agencies."
Commission President Manuel Barroso added that the move by Moody's "added another speculative element to the situation".
He also said it was strange that none of the ratings agencies were based in Europe.
"[This] shows there may be some bias in the markets when it comes to the evaluation of specific issues of Europe," he said.
All in, it seems to me that the EU might be setting up their own alternative to the ratings agencies, which could be a good thing if done right (independent companies) or a disaster (ruled from Brussels). Though honestly these days if you are looking for good pro-capitalist regulation, you need to leave the US and head to the EU.
That said, they are still around, and kicking. Mostly because there is not a clear alternative at this point, though smaller independent competitors are springing up.
This time, Moodys has pissed off the EU and the Germans in particular for its downgrade of Portugal to "junk" status.
German Finance Minister Wolfgang Schaeuble told a news conference that he wanted to "break the oligopoly of the ratings agencies" and limit their influence. He mentioned that "panzers" and "a quick but strong offensive using motorized vehicles backed by infantry and air cover" might also be involved.
All over the EU, the ratings agencies were not getting a lot of love:
"The timing of Moody's decision is not only questionable, but also based on absolutely hypothetical scenarios which are not in line at all with implementation," said European Commission spokesman Amadeu Altafaj.
"This is an unfortunate episode and it raises once more the issue of the appropriateness of behaviour of credit rating agencies."
Commission President Manuel Barroso added that the move by Moody's "added another speculative element to the situation".
He also said it was strange that none of the ratings agencies were based in Europe.
"[This] shows there may be some bias in the markets when it comes to the evaluation of specific issues of Europe," he said.
All in, it seems to me that the EU might be setting up their own alternative to the ratings agencies, which could be a good thing if done right (independent companies) or a disaster (ruled from Brussels). Though honestly these days if you are looking for good pro-capitalist regulation, you need to leave the US and head to the EU.
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